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Exchange Traded Products (ETPs)

Why invest in ETPs

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What are the benefits of investing ETPs

Convenient - easily traded and continually priced throughout market hours just like shares.

Diversification - over a whole market index or sector, so spreading risk and increasing access to a range of securities.

Access to a wide range of different asset classes - from familiar UK indexes like the FTSE100 to oil and precious metals.

Low cost - ETPs are traded like shares at normal dealing online commission rates, which start from just £5.95 for active traders. See full rates and charges.

No stamp duty on purchases - depends on the individual circumstances of each customer and may be subject to change in the future.

Physical vs Synthetic ETPs

Physical ETPs - Replicate an index physically through buying a basket of shares

Synthetic ETPs– Replicate an index synthetically with the use of derivatives.

For more information please refer to the Key Investor Information Document (KIID) and the Prospectus.

The Risks

Tracking Error

Tracking error is the difference between the performance of the ETP and the investment it tracks. Tracking error depends on the market conditions at the time and can either be in the client's favour or against them.

Counterparty Risk

Certain ETPs use complex financial products such as swaps (see synthetic ETP for details), futures and options with other third party counterparties rather than purchasing the assets themselves to achieve investment performance. If the investment bank providing these complex products fails, the ETP may lose a part or all of the funds they had invested. Investors should consult the ETP's prospectus to understand the Counterparty risk associated with the product.

Liquidity Risk

In certain circumstances, it may be difficult for an ETP to trade particular investments within a reasonable time at a fair price, which may reduce the ETP's returns. Also, during periods of reduced market liquidity or in the absence of readily available market quotations for particular investments in the ETP's portfolio, the ability to produce an accurate daily value to these investments may be difficult.

Stock Lending (Collateral)

ETP providers can generate further revenue by lending their holdings (collateral) out to other third party institutions, such as investment banks. If these third parties fail and the holdings are unable to be recovered, investors could suffer a potential loss. Different ETPs have different exposures to stock lending and the ETP prospectus should be consulted to determine the Collateral Policy for that product.

Currency Risk

If the ETP's underlying holdings are in a currency different to the denominated currency, investors will be affected by fluctuations in foreign exchange rates.

Leverage & Short ETPs Risk

The more an ETP invests in leverage derivative instruments, the more this leverage will magnify any losses on these investments. For leverage index-based ETPs, the value of the ETP's shares will tend to increase or decrease more than the value of any increase or decrease in its underlying index. ETPs that offer leverage are highly complex financial instruments with a high degree of risk and are not suitable for all investors. Investors should carefully consult the prospectus before investing so they understand the risks associated with these products before trading.

Concentration risk

To the extent that an ETP's Underlying Index or portfolio is concentrated in the securities of a particular market, country, industry, sector or asset class, the ETP may be adversely affected by the performance of those securities, subject to increased price volatility and may be more susceptible to adverse economic, market, political or regulatory occurrences affecting that particular market, country, industry, sector or asset class.


The tax treatment of an ETP is determined by your individual circumstances and the continued status of the ETP. The returns from trading ETPs could be subject to income tax rather than Capital Gains Tax. If you are unsure whether an ETP is suitable for your own individual circumstances you should consult a qualified tax advisor

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